COT: Crude selling slows; grains in demand

COT: Crude selling slows; grains in demand

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities, forex and bonds during the week to last Tuesday, November 14. A week that saw continued strong gains across stock markets after weaker than expected US economic data supported a growing belief that a soft landing could end the Federal Reserve’s aggressive rate hike campaign. The commodity sector recorded a small gain during a mixed week that saw 15 out of the 24 commodities trade higher led by grains, crude oil and metals like copper and silver.


Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?


The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.


Commodity weekly: Crude overshoots; silver the comeback kid
Global Market Quick Take: Europe – 20 November, 2023

 

  

This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, November 14. A week that saw continued strong gains across stock markets after weaker than expected US economic data supported a growing belief that a soft landing could end the Federal Reserve’s aggressive rate hike campaign. Bond yields extended their recent decline while the dollar continued to soften. The commodity sector traded mixed with gains in precious metals and agriculture offsetting losses in energy and industrial metals. 

Commodity sector:

The commodity sector recorded a small gain during a mixed week that saw 15 out of the 24 commodity futures trade higher led by grains, crude oil and metals like copper and silver. The prospect for peak rates and with that lower funding costs helped offset the potential negative demand impact from softer growth, while weather concerns in South America supported a strong week for soybeans and corn. 

Speculators such as hedge funds and CTA’s responded to this development by offloading additional crude oil exposure, and despite a small price bounce both WTI and Brent continued to suffer from the recent loss of momentum. The metal sector was mixed with profit taking seen in gold while under owned silver finally managed to attract fresh demand. The platinum short surged to a 14-month high while the copper short jumped 49%, both developments leaving traders unprepared for end of week rallies. 

The grains sector saw the strongest gains with dry weather concerns in Brazil's massive Mato Grosso state hurting the outlook for soybeans, and with that the availability of bean oil and bean meal, the two best performing futures contracts during the reporting week.

Energy: Eight weeks of WTI and Brent selling showed signs of slowing with the net long cut by 47% to 295k lots during this time. Gas oil length was cut by 44% while the NY based products saw fresh demand. Nat Gas length cut in response to record production and weak weather-related demand.
Metals: Gold length was cut following a near record buying spree in the previous three weeks with under owned silver instead getting some attention. Platinum’s slump to a 13-month low helped trigger a jump in the net short to a 14-month high while rangebound copper saw long liquidation increase the net short by 49%.
Grain traders turned broad buyers, led by a fourth week of soybeans and soymeal buying. Fresh buying reduced the corn net short by 3% while wheat was mixed with buying of Chicago being offset by selling of Kansas wheat.
In softs, the coffee net long reached 24k lots following a five-week turnaround from a 29k lots net short. Elsewhere the biggest changes were selling sugar (-16.6k to 184.2k) while cotton flipped back to a net short (-14.6k to -5.9k).
In forex, length was added to all positions, long and short, with strong buying of EUR and MXN partly offsetting selling of the other six IMM futures. Despite broad dollar weakness during the reporting week, the gross dollar long rose 11% to $12.7 billion, a fresh fourteen month high. The JPY and CAD short positions reached six-year highs at 158k and 70k while the CHF short at 20k was a 17-month high.
In bonds, leveraged fund buying of 2’s, 5’s and T-bonds were partly offset by selling of 10’s and 10’s and 30’s Ultra. Overall, the DV01 (value of 1 bp move) was cut by just $1 million to -$425 million, with the corresponding long position being held by asset managers and other reportables

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992